CBDC will be a new form of currency, which will allow households and enterprises to directly use central bank currency for electronic payment for the first time. Such change may affect the institutions of the banking system and the path for banks to achieve their goals of maintaining monetary and financial stability.

CBDC has both potential benefits and risks to monetary policy. For example, it can transmit monetary policy more effectively through some certain channels. However, these benefits and risks must be weighed well, such as the potential impact that the disintermediation of the banking industry has on credit loans.

The benefits of CBDC can only be realized when households and enterprises hold and use it to pay for something. This means that they must convert the paper money and commercial bank deposits in their assets into central bank currency in the form of CBDC, so a certain degree of disintermediation will be inevitable. However, the conversion of a large number of deposits into CBDC in a short time may have a significant impact on not only the cost and quantity of credit that the banking industry can provide, but also the way to achieve its goals.

The Bank of England will have new tools to adjust the use and attractiveness of CBDC, so as to control the balance between benefits and risks. Its existing macro and micro prudential tools not only play the role of deposit insurance, but also help banks manage risks.